A bipartisan group of state legislators from Bucks County are asking Philadelphia Mayor Jim Kenney to straighten out an issue with wage tax reimbursement for suburban residents who worked from home.
Philadelphia charges non-residents a city wage tax of 3.5019 percent for working in the city. Employees who did not work in the city on a particular day are not required to pay the city wage tax on their earnings for that day.
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Due to pandemic-related work-for-home requirements for many suburban residents who normally would be working in Philadelphia, many people whose employers withheld the wage tax are able to get a refund from the city.
The Philadelphia Department of Revenue said non-city residents and businesses can apply for refunds for wage taxes paid in 2020.
For individuals filing, there’s some paperwork, including a letter from an employer on company letterhead with time period or dates work-from-home was required, needed to request a refund. The city also wants a copy of the workers’ W-2.
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“We will not accept your refund request if you fail to upload these documents,” the city agency said.
Lawmakers – including State Rep. Tina Davis, a Democrat from Bristol Township; State Rep. Frank Farry, a Republican from Langhorne Borough; and State Rep. John Galloway, a Democrat from Falls Township – are asking the city government to make it easier for locals to get their wage tax refund.
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“Given the state mandate to work remotely unless impossible up until April 1, 2021, (and it is still strongly encouraged by Gov. Tom Wolf according to his most recent guidance to business) the requirement to provide an employer letter is burdensome and unnecessary,” the lawmakers wrote to Kenney last week.
“Due to this hurdle, suburban workers will leave thousands of dollars in the city coffers for hours worked in Bucks, Montgomery, Chester and Delaware counties,” said State Rep. Wendi Thomas, a Republican from Northampton Township who is helping lead the effort. “That’s money the city is not entitled to.”
The letter was signed by the county’s entire state house delegation.
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Farry and Thomas have introduced legislation to change the Sterling Act, which gives Philadelphia the right to tax non-residents.
The Great Depression-era Sterling Act allows the city to impose a wage tax on those who work in Philadelphia but live outside its borders. Municipalities with earned income taxes are unable to receive any of the tax revenue as they normally would when one of their residents works in another municipality.
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Past data has shown thousands of Bucks Countians pay city wage tax. The Bucks County Association of Township Officials released in 2015 that more than $20 million tax revenues were lost by suburban municipalities due to the wage tax. In 2017, an estimated $8.6 million in revenue was lost by Bucks County governments due to the city wage tax.
House Bill 949, the bill introduced by Farry and Thomas, would amend the Sterling Act to require Philadelphia to reimburse the surrounding taxing jurisdictions that impose an earned income tax at a rate equivalent to that which would have been collected from commuting workers of their hometown boroughs and townships.
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“To be clear, these local municipalities are receiving zero earned income tax dollars from those who work in the city. This increases the tax burden on all of the residents and business in those communities,” Farry said.
There have been previous attempts to change the Sterling Act, but those efforts have not had success in recent years.
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